managers can determine the best segmentation method
Course: Industrial MarketingPresented By: Shah Rukh (12485)
Sana Sadiq (12877) Hur Hussain Syed (12479)
Faculty: Amir A. Khan
How to segment Industrial Markets
nested approach
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INTRODUCTION Very little information available
Much difficult then consumer segmentationSeveral Products, same applications
Customer differ greatly
Which differences are important OR trivial?
Most industrial marketers use segmentation as a way to explain results rather than as a way to plan.
IM assist companies in many ways : Analysis, Selection of key markets & Management of Marketing
Business markets vs. consumer markets
Consumer markets Business markets
Many customers, geographically dispersed
Fewer customers, often geographically concentrated, with a small number accounting for most of the company’s sales
Smaller amounts of money involved Larger amounts of money involved
Shorter decision cycles Longer decision cycles
More reliance on mass marketing via advertising, Web sites, and retailing
More reliance on personal selling
Less-rigid product standards More-rigid product standards
Focus complex grouping of purchase situations, events, and personalities
5 general segmentation Criteria
Not necessary or desirable that every Industrial marketer use each 5 criteria's
Marketer completely Understand the process & may skip some criteria
NEW ANALYTICAL TOOL TO SEGMENT THE MARKET…
Anal
ytica
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l- N
ESTE
D A
PPRO
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…
• Picture explains how criteria relates to one another in a nest• Marketer to move from general to specific segmentation criteria• Largest and Generic = Demographics• Smallest and Specific = Personal Characteristics
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Criteria 1: DEMOGRAPHICS
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• Most general segmentation criteria
• Broad description of company
• Relate to General Customer Need
• Can be determined w/o visiting customer
Basics of DEMOGRAPHICS Segmentation
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•Industry
•Company Size
•Customer Location
Parameters…
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Eg.: Segmentation in various Industries for CAT
• Textile • Oil & Gas• Institutes• Hotels and Resorts• Shopping Malls• Hospitals• Automotives• Beverages
Regional Market Share of CAT gensets
Geographical Market Share
1%5%1%
1%2%
61%
29%
Karachi
Faisalabad
Multan
Lahore
Muzafargarh
Islamabad
Kotri
Eg.: Geographical Segmentation
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Criteria 2: OPERATING VARIABLES
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•Company Technology
•Product & Brand-Use Status
•Customer Capabilities
Parameters…
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Criteria 3: Purchasing Approach
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•Purchasing Function Organization
• Power Structure
•Buyer Seller Relation ships
•General Purchasing policies
•Purchasing criteria
Purchasing function organization:
Centralized versus De-Centralized Approach
Global Key Accounts
Shell Pakistan was trying its best to tap KCA Deutag Pakistan, a drilling company, however could not close the deal as all decisions were made by their regional offices.
Examples of Purchasing Approaches:
Power Structure:
Identifying the right D.M.U
Dominance of Procurement / Engineering / Finance Dept over purchase of a particular product
Uch Power needs 100,000 Litres of Turbine Oil for their newly built plant. The power to decide would rest in a cross functional decision making team, consisting of engineering as well as finance dept.
Examples of Purchasing Approaches:
Buyer Seller Relationship Relationship plays key role in purchase decisions. This includes
partners, joint venture establishments and industrial alliances also.
A successful B2B marketer is the one who can build his relationship with his customers.
Out of the office relationships can also play a role if there are no conflict of interests.
Some marketers also end up developing friendships and informal relationships with their buyers as well.
Examples of Purchasing Approaches:
General Purchasing Policies The organizations general purchasing terms also plays an
important role for segmentation.
One can differentiate between credit and cash customers.
Long term / Short Term Policies.
Purchase patterns, safety stocks policies, contractual requirements.
Govt owned entities have very stringent purchase policies.
Examples of Purchasing Approaches:
Purchase Criteria A mix of all the criterias mentioned in the previous slides.
Examples of Purchasing Approaches:
Criteria 4: SITUATIONAL FACTORS
One of the most important segmentation criteria.
As from situation factors, you find problem areas for the customers. From problem areas , you understand the marketing implications!
Urgency of order fulfillment
IoBM procures diesel fuels for their standby generators every month. Chevron usually takes 3 working days to deliver the fuel to them. On the convocation day – due to an unfortunate spillage in their storage area – all the diesel became contaminated and could not be used. Mr. Talib Karim calls Mr. Amir Khan and speaks about the problem. How, in your opinion, will the sales person respond to the customer in this situation?
Difference between routine replacements and emergency replacements
Hot-Order Shop – A factory for urgent orders only
Most companies are willing to pay an extra charge to get the job done more quickly.
Examples of Situational Factors:
Product Application
Linde Pakistan (Formerly British Oxygen Company) is a company that captures, compresses and supplies Oxygen. Ever wondered – the marketing implication for a sales person for two different types of customers. – A Hospital and A Mechanical Welding Shop?
Standby Machinery V/s Critical Machinery
Routine V/s Special Scenarios
Examples of Situational Factors:
Size of Order
You are a Mitchells Ketchup Sales Person, How would you differentiate between receiving a call from the Procurement Lead of McDonalds Pakistan & a call from the local Aslam Kiryana Store?
Volume Does Matter
Minimum Order Quantities
Implication for suppliers having multiple manufacturing facilities
Examples of Situational Factors:
Criteria 5: PERSONAL CHARACTERISTICS
Always remember, People, not companies, make purchase decisions!
Buyer – Seller Similarities
As humans we have a natural tendency towards bias.
The most successful sellers are the ones who can find the most similarities in their buyers.
Synergy in place – Sharing best practices
Examples of Personal Characteristics:
Individual Behaviors
Some people base their decisions on past experiences, some base it on their knowledge. (eg. :3 Global suppliers, good experience with 1 Only- MHE’s)
Relationships can play a major role. Especially in Pakistani markets.
Descon is an engineering giant. A few years ago – some key persons moved out of the company and formed Etimad Engineering. Taking along with them a major chunk of business.
Examples of Personal Characteristics:
Risk Management Strategies
Some buyers are risk averse, others are risk receptive.
The bad news is that majority of the buyers are risk averse.
Risk Receptive Buyers can be targeted by highlighting the positive outcomes.
Risk averse buyers need to be proof of performance. Testimonials, Recommendations, OEM Approvals, Field Test Results and what not !
Examples of Personal Characteristics:
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Reassembling the Nest
1.) No Segmentation
2.)After the fact Segmentation
3.)Superficial Segmentation
4.) Obtuse, Convoluted and disorganized segmentation Outer nest data: Inner nest data:
Highly Visible Less visible
more or less permanent more transient
Require little intimate knowledge of customers
Require extensive vendor research
• 3 outer nests = Company Variables
• Criteria change when move from Outer to inner nest in terms of: 1.) Visibility 2.) Permanence 3.) Intimacy
4 other possibilities of Segmentation
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SUMMARY• Easy approach to use HIERARCHICAL STRUCTURE
• Marketer balance b/w “Easily acquired data from Outer nests” & “Detailed analysis of Inner nests”
• Outer nests = More data , clear definitions
• Inner nests = detailed, more useful
•“ Data Availability” and “Analysis of available data” are two separate approaches
•Any approach can not be neglected ONLY b/c the data is unavailable
• Cost = stay in outer nests, cost = gain useful data of inner nests
• Inner nests not considered Ignoring buying differences b/w customers
• Small Markets Emphasis on inner nest factors is EXPENSIVE & TIME CONSUMING
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CLEAR & DISCIPLINED PROCESS
SIMPLICITY + LOW COST from OUTER NESTSRICHNESS + EXPENSES from INNER NESTS
CONCLUSION
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THANK YOU